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FOCUS on Top Incomes and Taxation in OECD Countries: Was the crisis a game changer?

OECD work on Income Distribution and Poverty, May 2014

“The share of the richest 1% in total pre-tax income have increased in most OECD countries in the past three decades, particularly in some English-speaking countries but also in some Nordic (from low levels) and Southern European countries. Today, they range between 7% in Denmark and the Netherlands up to almost 20% in the United States. This increase is the result of the top 1% capturing a disproportionate share of overall income growth over the past three decades: up to 37% in Canada and even 47% in the United States. This explains why the majority of the population cannot reconcile the aggregate income growth figures with the performance of their incomes. At the same time, tax reforms in almost all OECD countries reduced top personal income tax rates as well as rates of other taxes affecting the highest income earners. The crisis did put a temporary halt to these trends – but it did not undo the previous surge in top incomes. In some countries, top incomes had already largely recovered in 2010. To respond to these trends, governments have several options at hand to increase effective taxation paid by top income recipients without necessarily raising their marginal rates, to improve tax compliance and to reduce tax avoidance.”

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